(Trade) War and Peace: How to impose international trade sanctions

• Main Authors: DE SOUZA, Gustavo, HU, Naiyuan, LI, Haishi, MEI, Yuan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: Trade sanctions; tariff; tariff competition; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2738; https://ink.library.smu.edu.sg/context/soe_research/article/3737/viewcontent/TradeWarePeace_av.pdf
• Institution: Singapore Management University

What is the most cost-efficient way to impose trade sanctions against Russia? We build a quantitative model of international trade with input–output connections. Sanctioning countries choose import tariffs to simultaneously maximize their income and minimize Russia's income, with different weights placed on these objectives. We find, first, that for countries with low willingness to pay for sanctions against Russia, the most cost-efficient sanction is an approximately 20% tariff on all Russian products. Second, if countries are willing to pay at least US$0.70 for each US$1 drop in Russian welfare, an embargo on Russia's mining and energy products is the most cost-efficient policy.